Introduction

The United States and several allies and partners presently enjoy an advantage over China in collectively producing the advanced semiconductors necessary for artificial intelligence (AI) and other leading-edge computing technologies. This advantage stems from their tight control over many parts of the semiconductor supply chain, including over design and advanced inputs to production like the semiconductor manufacturing equipment (SME) necessary for advanced chips, and it has promoted comparatively safe and ethical technology development. Yet the complexities of the global semiconductor industry do not guarantee a future edge for the United States and other democratic chipmaking leaders amid strategic competition with China.

Despite its advantages in research, equipment, design software, and intellectual property (IP), the United States lacks onshore semiconductor fabrication facilities (fabs) that covert these and other inputs into leading-edge chips. This reality could undermine the country’s chip access and its leading role in advanced semiconductor supply chains. The United States overwhelmingly depends on Taiwanese and South Korean manufacturers for leading-edge logic chip imports, exposing its access to geopolitical risk. Meanwhile, China hopes to lessen its long-term dependence on foreign advanced chips by supporting its domestic manufacturers like SMIC and YMTC and, increasingly, by investing across other parts of the semiconductor supply chain. With unfettered access to advanced chips, China could pursue leading-edge computing capabilities in AI and other areas that threaten the interests, values, and security of the United States and its allies.

The United States should therefore work toward two primary objectives when it comes to sustaining and growing its semiconductor advantages over China. First, protecting the U.S. SME advantage entails preventing China from producing leading-edge chips. The United States will need to work with its allies and partners to protect SME supply chains from Chinese access and promote their development on friendly shores, safeguarding U.S. economic and military advantages using tools such as export controls and end-use monitoring. Navigating competitive economic dynamics among governments and multinational private sector firms while working toward shared goals may prove challenging, but will be critically important.

Second, the United States needs to limit potential risks to its own semiconductor supply by reshoring chipmaking capacity. It can achieve this goal by prioritizing and allocating incentives to domestic and allied firms through vehicles like CHIPS for America Act funding that, coupled with regulatory reforms that ease burdens on firms, would decrease the attractiveness of offshoring chip manufacturing. This brief discusses incentive prioritization in terms of leading-edge logic, leading-edge memory, and legacy logic chips. At the same time, exploring legislation to secure access to skilled foreign labor while investing in domestic education and retraining can help build the future U.S. semiconductor workforce. Holistically approaching the protection and reshoring goals could bolster U.S. control over both the IP behind SME and advanced chips and the physical fabs that produce them.

This brief lays out findings from across CSET’s work on these issues to help policymakers scope the challenges ahead and identify paths forward.